Thanksgiving 2020 will bring about a new experience for a traditional holiday. Without a doubt, 2020 will be remembered as a year that tested our ability to cope, adapt, and tap into creativity. Our Wells Fargo Food and Agricultural Industry Advisor group reached out to its large base of farmers, ranchers, and food manufacturers to see what might be different this year given the impacts of COVID-19 on the U.S. food system. We also visited with our food retailer and food service customers to learn how food and beverages will make their way to our Thanksgiving tables.
U.S. farmers, ranchers, and livestock producers dealt with a wild year. On top of the usual weather issues and trade disputes, this year’s pandemic added to their typical volatility and illustrated two key differences for the sector:
- Crops: Most crop producers didn’t see the same level of disruption as the livestock producers. Crops are geographically dispersed and most have become intensively mechanized, limiting the impact from COVID but rather tariff and trade challenges. Some of the specialty crops faced more challenges, but they prevailed in managing COVID.
- Livestock: In contrast, the livestock flows from dispersed barns and fields into the centralizing processing facilities. Since March, processors have struggled with keeping their employees safe in tight quarters while allowing those animals to continue to flow in.
Supermarkets and stores are well-stocked despite the disruptions, though we will need to see how smaller gatherings will impact the spread on the table. We hope this outlook helps you better plan your menu, and wish everyone a Happy Thanksgiving!
Appetizers: Wine and cheese (and our good friend butter, too)
For many people, holidays and special occasions call for a glass of wine. The wine outlook shows ample supply this year, but western wildfires may affect supply in 2021 and 2022 as wineries process the disrupted 2020 vintages. Retailers are stocking up, mindful of changing consumer patterns that show retail sales of wine up over 25% in October 2020, according to Nielsen.
If you are looking for something different from the typical varietals like Chardonnay or Pinot Noir to pair with your meal, Nielsen indicates that these wines grabbed market share from other varietals over the summer:
- Bubbles grew 30% or more
- Sauvignon Blanc grew 26%
- Red Blend grew 22%
For those planning to dine outside or forego fine china for paper plates, wine in a can is a convenient option. Wine quality has been improving, and the number of product offerings is growing. Sales are up 57%, although canned wine is still gaining traction from a small base.
Cheese and butter – A tale of two markets
Items made with butter and specialty cheese platters are popular at holiday gatherings. Baked goods, such as cookies, cakes, and specialty breads using butter or cream are big hits. Cheese platters are ubiquitous with holiday gathering, and cheese is often a key ingredient in dips and hors d’oeuvres.
Wholesale prices for butter and cheese have largely flip-flopped this year. Spot cheese markets skyrocketed to $2.50–$3.00/lb., well above the five-year average of $1.70/lb. As the following graph reveals, butter has been trading under $1.70/lb. for 2020, well below its $2.15/lb. average. Reasons for the market shift are tied to the pandemic: Butter is used more heavily in foodservice; cheese prices have gotten a boost from USDA purchases for pandemic-related feeding programs.
As butter and cheese are consumer staples, grocery retailers may retain the usual promotional pricing programs over the upcoming holidays, especially on butter. Don’t be surprised if the price of your party cheese platter, or your favorite brie, gruyere, or Muenster, lightens your wallet more than usual this season.
The main course: Turkey and replacement proteins
Will turkey remain the champion at the center of the table? Thanksgiving 2020 will reveal turkey inventories are significantly lower than a year ago for both frozen whole bird and frozen breast. Lower supplies should create a positive price response, and that has happened in some products. As for Thanksgiving, the price increase in whole bird hens from 2019 through 2020 is notable. Another positive factor for turkey producers comes from the recent increase in export volume causing competition for the domestic buyer.
While whole bird prices have increased notably, other turkey products, such as breasts, have not seen the same level of price increase, as illustrated in the graph below. Despite the modest increase as of May 2020, prices trail 2019 levels, which were already historically poor. The lagging 2020 turkey breast prices can be laid at the foot of lower foodservice volumes and prices, and whether the 2020 Thanksgiving season could see added consumer purchases for turkey breast rather than whole bird is yet to be determined.
While turkey will likely remain the primary meat consumed, other proteins such as beef or pork are likely to be more common this year. The smaller gatherings may result in more hams or steaks, which are better suited for fewer people and may target individual tastes.
COVID-related plant shutdowns and slowdowns caused beef and pork to have an extremely volatile year. Through it all, consumer’s demand has survived the turbulence well. Beef production fell 13.5% in the spring and resulting cutouts averaged 36.5% above the previous spring. Summer plant production has rebounded and is now above 2019 levels. The Livestock Marketing Information Center (LMIC) expects third-quarter production to be 2–3% above 2019, pushing the price down below last year for families grilling steaks on Thanksgiving.
The pork complex had a very dramatic 2020 story as more packing plants shut down and the backlog of hogs led to a complete disconnect pricewise. Producers were faced with record low live hog prices while cutout values were at record high levels due to supply shortfalls. Though the plants have recovered and are working through the backlog, cutout prices remain significantly above 2019 levels. In fact that spiral ham (even with bone-in to limit labor costs) remains 39% above the 2019 level as we move into the holiday season1.
Seafood and dairy holiday meals
Lower grocery prices for seafood a possibility
Seafood has been part of holiday meals and celebrations. With potentially fewer folks at the party or around the table during the upcoming winter celebrations, hosts may want to feature seafood on their menu.
Lower demand in the foodservice sector due to pandemic related closures has redirected a high volume of seafood into the retail grocery sector, resulting in sharp wholesale price declines. For example, farmed shrimp and farmed Atlantic salmon are trading at roughly $0.80/lb. and $0.60/lb., respectively, both below their five-year-average price levels. Although farmed shrimp and salmon are largely imported, despite pandemic related foodservice closures, U.S. imports of both items are up over prior-year volumes and promotional prices when placed on ad at grocery retailers are at five-year lows — making them more affordable treats for your holiday guests.
Shrimp and salmon prices near 5-year lows
Side dishes: Fruits and vegetables
Fruits and vegetables can easily be scaled for a smaller and healthier gathering. In this wild and crazy year, produce growers have been working diligently to ensure that people have fresh, frozen, and canned products available for their holiday meal. Pandemic or not, crops continue to grow, and America’s produce farmers are doing essential work to put food on America’s tables. Washington state apple growers are wrapping up a successful harvest, with plenty of fresh apples available to make apple pie. Lettuce markets have been volatile all season with disruptions in demand due to COVID and several heat spikes that pushed crops ahead of schedule. The weather forecast is showing more moderate weather as we head into November, and the leafy greens for your holiday salad will be fully transitioned to southern California and Arizona.
Canned corn and green beans are back on the shelf after March and April’s panic buying, with sufficient supplies for casseroles and stuffing mixes. Don’t forget the mashed potatoes! Fresh potato demand has been strong all summer, and growers will be wrapping up the 2020 harvest season as we settle in to November. Sweet potato growers are also winding down their season; while labor was a challenge in 2020 to get the crop to market, expect high-quality fresh yams on the shelf.
Last but not least, what would Thanksgiving be without the cranberries? We began the 2020 season with the lowest inventory levels since 2011, but with a strong growing season in Massachusetts and Wisconsin, we are all set to enjoy that tart treat.
Your favorite fruit and vegetable products have been grown with loving care and are ready for the season. While product has been grown and processed, finding your favorite produce item may become a function of logistics as retailers don’t quite have clarity on what shopping patterns will be this season. You may want to compile your shopping list and visit the store or online retailer earlier than usual for items you can purchase in advance.
Don’t forget the dessert
You may be looking forward to your favorite dessert of pumpkin pie this Thanksgiving, but you might consider pecan pie instead when you realize that pecans are indigenous to the U.S. According to U.S. Pecans, the organization that runs the recently formed Federal Marketing Order, “Pecans are the only major tree nut indigenous to America, with a storied history among Native Americans and early settlers.”
Grown primarily in the South, and Southwest, pecan plantings have been holding steady at approximately 400,000 acres over the last three years, as the industry has been challenged with damage from hurricane George, elevated tariffs in the Chinese export market, and increased foreign competition. Disruption in sales to foreign markets means that pecans will be available to U.S. consumers this holiday season.
What if you have a craving for something a little out of the ordinary at Thanksgiving this year, say pistachio brittle? You may have some pistachios on your shelf already and like many other pantry staples, tree nuts have been in demand during the the COVID-19 pandemic, as shoppers look for shelf-stable sources of protein. Retail consumption peaked in March, but has held fairly steady since that time as eating at home replaced eating away from home. If COVID -19 cases continue to rise this winter, the outlook is for continued pantry stocking and strong demand for tree nuts in all categories.
How to shop
Thanksgiving tradition often involves multiple shopping trips to the grocery store or supercenter to get all the special ingredients, and typically, those crowded stores are a source of both aggravation and enjoyment. The Center for Disease Control (CDC) has outlined guidelines for fall holidays on its website, suggesting small dinners with household members or outdoor gatherings with extended family or friends. Nevertheless, the CDC is quick to label grocery shopping in crowded stores as a high-risk activity. That said, the question for how Americans shop for Thanksgiving dinner must be addressed.
The grocery business has historically been a slow adopter of e-commerce; however, the pandemic has accelerated consumer adoption of delivery services. During the pandemic, we have seen an explosion of growth for online grocery delivery sales. Using August 2019 as a benchmark, the industry had $1.2B in sales. Fast forward to March 2020, the online grocery industry experienced $4.0B in sales, with sales growing an additional billion dollars each month through June 2020, where they recorded $7.2B in sales.2 More than 45 million customers used a variation of grocery delivery or pickup in June 2020, which is more than one-third of American households.2 Order frequency and average order size also increased over this same period.2
Thanksgiving remains a time to be with friends and family, even if some guests attend by video chat. As America begins planning for Thanksgiving dinner, people are going to be left with tough choices this fall, including who to cook for and how many people they’ll invite. Once the menu is figured out, it is likely consumers will continue the trend of ordering their grocery items online. With anyone vulnerable to COVID-19, it may just be the most efficient and safest way to order groceries for this year’s Thanksgiving dinner. And no matter how we choose to celebrate, a round of applause goes to the U.S. food system for keeping us fed and to those who made it happen: the farmers, food manufacturers, retailers, and workers. Even with the pandemic, they all kept their promises, so we can enjoy our holiday during this challenging year.
1 USDA: Livestock, Dairy and Poultry Outlook
2 Bricks Meets Clicks: Tracking Online Grocery’s Growth